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Estate Planning Strategies

Estate Plan Maintenance

Choosing an Executor, Health Care Proxy, & Others

After you've learned the basic concepts of estate planning, consider the people who will help carry out your wishes for your estate.

The executor and guardians for children are usually named in your will; the health care proxy, living will, and durable power of attorney are usually distinct legal documents authorizing specific individuals to carry out certain tasks. The trustee of your trust is named in your trust document.

Executor of the will

The executor carries out the terms of the will and sees the estate settlement process through to completion. The executor should have financial savvy and patience, because that person will be responsible for collecting the deceased’s assets, paying bills, submitting tax returns, submitting and petitioning for court documents, and distributing the assets to beneficiaries on behalf of the estate. If your executor does not have any experience with estate settlement, he or she may likely turn to an attorney for guidance.

You may appoint more than one executor, if you know two people who have skill sets and personalities that make them good candidates for the role together, as co-executors. You may also wish to appoint a professional, such as a lawyer, accountant, bank, or trust company, as executor or co-executor.

Guardians for minor children and other dependents

To help ensure that the needs of your minor children are taken care of in the event of your death, a legal guardian to care for them is usually named in the will. A guardian can be your spouse, a family member, or a trusted friend.

If you leave assets outright to your minor children, then the guardian might manage those funds, as well. This person will be responsible for adhering to state guidelines on how your children’s money is spent and invested until the children reach the age of majority. The guardian may have to submit annual accountings to the court to ensure that these funds are being properly managed for the benefit of your children.

If you name minor children as the beneficiaries of a trust, the trustee will carry out the terms of the trust and distribute the trust assets accordingly.

Consider naming a guardian for children or other dependents who may be unable to care for themselves as adults to ensure they have the care and oversight they need indefinitely. Life insurance may help ensure they have the necessary funds for living expenses if they are unable to make a living for themselves.

For other aspects of their care, many options and combinations of options, up to full legal guardianship, are available to balance the individual’s autonomy and best interests. An attorney with experience in this area can help you make the best choices for your situation.

Health care proxy and living will

A health care proxy document allows you to give another individual legal authority to make health care decisions for you in the event you become incapacitated. In addition, a living will or advance health care directive can allow you to state your wishes directly to your doctors.

The names of these documents, their validity, and how they are used vary from state to state. Some states combine them into one document, and some allow a single document to give the same person power of attorney and appoint them health care proxy (“health care power of attorney”).

The basic ideas, however, are to 1) appoint a person you trust to act on your behalf for health care decisions when you cannot, and 2) ensure that your intentions are well understood. Regardless of whether or not you choose to create a living will, a frank conversation with your health care proxy about your wishes under various scenarios is a good idea.

Power of attorney

A power of attorney document gives another individual the authority to make legal decisions and take action on your behalf in accordance with the document. This person is known as the “attorney in fact” or “agent” and can be your spouse, partner, or anyone you trust. A power of attorney can apply to all your affairs, or be limited and apply only to particular assets or accounts you own.

A durable power of attorney means this arrangement will generally continue until your death, unless it is formally revoked; it remains in effect when you become incapacitated or are no longer able to make financial decisions on your own behalf. The durable power of attorney can take effect immediately or at the time of your incapacity, but must be established while you still have your mental faculties. You cannot create a durable power of attorney once you become incapacitated.

Trustee

Any asset placed in a trust as part of your estate plan will require a trustee. The trustee acts as the legal owner of trust assets, and is responsible for managing the assets, ongoing administration and tax filings for the trust, and making distributions to your beneficiaries according to the terms of the trust.

The trustee designation is included in the terms of the trust. It is also a good idea to consider a successor trustee or include terms for choosing a successor trustee, to take over in the event your original choice becomes unwilling or unable to fulfill the role.

Questions to ask when choosing a trustee

Is the person willing to be a trustee?

Does the person have the skill to understand the trust terms, manage the assets (e.g., money, investments), complete tax filings, and keep records?

Does the person have the time to fulfill the role effectively?

What is the person’s relationship to the beneficiary? Will he or she be able to make objective decisions in the beneficiary’s best interest?

If the beneficiary will need a guardian, is the guardian also the best person to be trustee, or would the roles be better filled by different people?

If you don't feel you know anyone who can carry out the duties of a trustee effectively, you might consider co-trustees or naming a corporate trustee, like Fidelity,* to serve as sole or co-trustee. Corporate trustees often have the advantages of:

Acting as neutral, objective third parties, who can make even difficult decisions according to the terms of the trust and in the beneficiaries' best interests without the influence of personal bias or family dynamics.

Ensuring continuity for the life of the trust, unlike a private individual who may need to step down from the role due to illness, death, or other obligations.

executor

successor trustee

individual named in the terms of a trust to assume the role of trustee should the originally appointed trustee be unable or unwilling to assume or continue in the role; for living trusts, the individual named in the trust to succeed as trustee upon the owner's death

The tax information and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.